EDF questions energy chiefs on second day of merger hearings

Hanah Cho, The Baltimore Sun

Constellation Energy's second-largest shareholder and a partner in its nuclear business grilled the Baltimore company's chairman and chief executive, Mayo A. Shattuck III, about his compensation and proposed role at Exelon Corp. during the second day of regulatory hearings on the $7.9 billion merger of the two energy giants.

EDF Group opposes the merger and has had a strained relationship with Constellation since last fall, when the Baltimore utility pulled out of plans to develop a proposed third nuclear unit at Calvert Cliffs in Southern Maryland. As a result, Constellation also exited its joint venture with EDF to develop other nuclear projects. EDF still owns nearly 50 percent of Constellation's nuclear plants.

Shattuck and Exelon's chief operating officer, Christopher M. Crane, were questioned for a second day by EDF and other parties, including the city of Baltimore, consumer advocates, and environmental and union groups.

The bulk of Tuesday's proceedings centered on questions from EDF lawyer Martin Flumenbaum, who raised issues related to the executives' roles in the combined company. Crane would become chief executive officer, while Shattuck has been designated executive chairman.

Referring to a confidential exhibit — an email from Exelon CEO and Chairman John Rowe to Exelon's board of directors — Flumenbaum hintedthat Rowe had told the board that a major role by Shattuck in the combined company would be a "problem." Flumenbaum then asked Crane to explain discussions surrounding Shattuck's being named executive chairman.

"Did Mr. Rowe tell you Mr. Shattuck was a problem?"

"No," Crane answered.

"Did Mr. Rowe tell you that the value of the deal was such that it was worth making Mr. Shattuck executive chairman?"

"Yes."

Crane said Rowe wanted to make sure that the roles and responsibilities of Crane and Shattuck were clearly defined. Crane pointed out that Rowe had briefly shared the top position with another executive — a situation that did not turn out well.

In questioning Shattuck, Flumenbaum pressed the Constellation chief to say how early in the negotiations he made it known that he wanted to remain with the combined company.

"You make it sound like I'm asking for a job," Shattuck said. "I'm losing a job in this transaction, not picking one up."

Flumenbaum noted that Constellation shareholders rejected Shattuck's $15.7 million compensation for 2010 in an advisory vote earlier this year, and that his salary is larger than Rowe's $7.2 million when Exelon is twice as large as Constellation.

Because of the proposed merger, Shattuck said, the company didn't explain his compensation to a shareholder advisory firm because "it's a moot point." He said Tuesday that not working with the firm, which recommended a negative vote on his salary, was a mistake.

Flumenbaum next asked Shattuck to spell out potential payouts if the merger was successful.

Shattuck is eligible to receive $12.4 million, including $9.3 million for accelerated payment of previously granted stock options and cash-based performance payments.

When asked about severance, Shattuck said he would receive an additional $3 million if he were terminated due to the merger. "I want to point out that ratepayers don't pay for any of my compensation," he added.

In response to questions from an attorney for the International Brotherhood of Electrical Workers, Crane affirmed Exelon's commitment not to involuntarily lay off BGE workers for at least two years after the merger closes. Baltimore Gas and Electric employs about 3,500 workers.

But since Exelon is pledging only to not lay off BGE workers, attorney Lucas Aubrey asked whether the company would stop hiring for the next two years. Crane disagreed and said that BGE's chief executive, Kenneth DeFontes, "has flexibility to fill positions and hire as he needs to."